Tesla’s Latest Revolution: The Gigafactory

May 7, 2016 By The SOE Team

Tesla Motors has already transformed the electric car industry, creating a luxury electric vehicle that’s more powerful and efficient than any other electric car on the market. But on February 26 the car manufacturer shocked the world again, announcing its plans to build what it’s calling the Gigafactory.

The Gigafactory, which will cover 10 million square feet, will operate as the world’s largest battery factory and launch the company from a small operation to a mass-market automaker. Tesla, which is projected to build 35,000 of its electric luxury vehicles in 2014, says the factory should be fully operational by 2020 and will produce about 500,000 vehicles annually.

With this facility as a resource the company will be able to produce more lithium ion batteries in one year than were produced worldwide in 2013. This type of mass production should help drive down the kWh cost of Tesla’s battery back by more than 30 percent, which could, in turn, lead to more affordable cars. The company’s cheapest electric vehicle is the Model S, which starts at $71,000.

Beyond the possibility of cheaper vehicles, the project holds promise for the power grid. A major issue with the electricity market today is the vast inability to store power. But batteries capable of storing large amounts of energy, created in the Gigafactory, could break through that barrier, providing a cost-effective power storage solution that could bring more renewable energy to the homes of American people.

Although Tesla hasn’t finalized a site for its new factory, the company expects that the facility will be located in Arizona, Nevada, New Mexico or Texas. Whichever state Tesla chooses should see an economic boost as the facility could come with $5 billion in investments and 6,500 jobs.

The company plans to invest $2 billion of its own money into the project and intends to raise another $1.6 billion to $1.84 billion through bonds in an underwritten registered public offering. Half of the notes will be due in 2019, while the other half will be due after the project is complete in 2021.

The interest rate, conversion rate and terms of the notes have not yet been announced. But those who invest will be able to convert their notes into cash, Tesla’s common stock or a combination thereof, at Tesla’s election.